ESTIMATING REVENUES

Estimating revenues for a movie is hard, so hard in fact that most sales agents admits that their sales estimates really is more of “guesstimates” than real estimates. However, there are a few ways to get some sort of general idea about what kind of revenues to expect – and I’ll try to provide some general advices for this process.

Don’t do your own estimates

Having a producer estimating the movies revenues oneself is like having a parent deciding how cute their new baby is. It will probably not be the most objective rating, but rather a reflection of feelings. This is why it’s wise to use someone else to do the estimates of potential revenues. Preferably the distributor and sales agent attached to the project – and then check their track record to see if their estimates are reasonable (count on them being high, since they’re trying to make you chose them for your movie).

Estimating ”star power”

In the same way a producer shouldn’t do his or hers own estimate of revenues, he or she shouldn’t do the financial estimation of the “star elements” attached to the project. This is also best left for the distributor and sales agent, since they work closer to the audience and the buyers – and knows what names are “hot” or not. They can also often advise you on what fees are appropriate, in relations to their “market value”.

Estimating revenues based on distributor

A known fact is that most buyers buy very, very few movies from less established sales companies – and the majority of the audience goes to see movies distributed by the majors. However, this being said, it’s not always the best way to go with the biggest and most established company. For a smaller independent film, it might not be the right choice – since they might not have established relationships with the potential buyers for that particular movie. Regardless the producer needs to do research which similar movies, has been distributed by what company, and how they’ve performed.

Estimating revenues based on marketing

To most people it’s quite obvious that a movie with a “wide”-distribution strategy, shown on thousands of screens across the country, has a totally different potential for generating revenues then a small art film that barely has any marketing at all aside from “the festival route”. However, you still see many first time filmmakers make comparisons between their own films that might not even have secured a distribution deal – and large scale Hollywood productions with tens of millions in P&A. When you estimate revenues, you therefore must take the distribution strategy and marketing budget in to account.

Estimating revenues based on budget

On some level there’s a connection between how much money you spend on a movie – and what kind of result you get – at least in terms of expectations. Audience- and buyers expect that a movie with a higher budget should be better – and this then becomes self-fulfilling. Buyers also tend to pay more for a movie they know have cost more to produce, which is why most producers “inflate” their budgets.

Estimating revenues based on genre

Different genres need to be exploited in different ways. E. g there are a much higher demand for Sci-fi, action and thrillers on the international market, while comedies – due to the fact that they most often have some sort of cultural bond – seems to work best on the domestic market. Different genres are also different in terms of how dependent they are of other factors like “star power” and execution. E. g a teen horror is very dependent on a good concept – but not always as dependent on having known actors, while the reverse usually is true for romantic comedies.

Estimating revenues based on execution

One of the most difficult things to predict is the execution of the movie, how good it will be in terms of artistic performance. Usually you don’t have good idea about this until the movie is completed. This is why most distributors and financiers look for such things as “high concept”, solid genre, and “star power” – to avoid being dependent on execution. What a producer needs to do is to estimate how dependent on execution the movie and then adjust the “high” and “low” estimates from this – since the risk becomes greater on a movie that are more dependent on execution. E. g. a low budget monster movie with a great concept is not at all as dependent on execution as a classic drama type love story.